to new heights
In the United States, the broadband subscriber base is
getting wider and broadband services more diversified.
Creative American companies are catalyzing a new wave
of broadband network construction and operations.
Cable and satellite TV operators and Google-led IT
pioneers are joining traditional telecom operators in
exploring the broadband market and finding their niche
segments that match their own resource bases for more
promising business outlook.
By Zhou Jing
espite concerns over an economic meltdown, the
U.S. telecom industry has maintained a robust
growth momentum breathing new life into
the nation’s economic recovery. In 2009, tier-1
operators in the U.S. reported CAPEX of over 51 billion
USD, and earned over 350 billion USD from telecom
services including pay TV. Largely driven by broadband
services and network construction under innovative business
models, their combined earnings before interest, taxes,
depreciation and amortization (EBITDA) soared 35% over
the previous year.
Win-Win / AUG 2010
Traditional telcos and network- revenue. To better serve this segment worldwide, AT&T
prioritizes personalized services over the mobile Internet
based service growth models as part of its enterprise service portfolio along with voice
transfer and mass data transfer services. Business customers
Compared with other industry players, traditional can now employ various technologies and develop software
leading operators continue to generate higher total service and applications for end consumers to download; AT&T
revenues from their existing network infrastructure and shares in the profits.
subscriber base. However, if only connections and access Additionally, AT&T is accelerating its efforts to offer
services are offered, they could plummet to the bottom more cloud computing-based commercial applications
of the industry chain. In response, they have stepped up for businesses to deliver powerful computing capabilities,
efforts to consolidate networking resources and explore massive storage and a wide selection of applications by
service growth models in addition to delivering high- utilizing IT resources flexibly. Therefore, the operator has
quality, high-speed and low-cost networking services. developed a unique ability to send data from managed
terminals to application desktops, while providing server
AT&T deploys Wi-Fi to facilitate service and data center solutions.
Verizon seeks a new balance between voice and
As the leading integrated service provider and the
operator that possesses the most Wi-Fi hotspots in the
U.S., AT&T has established a network infrastructure that The U.S. probably has the world’s highest mobile
combines Wi-Fi, WiMAX and cellular capabilities that are minutes of usage (MoU) per person per month, in excess
adaptable to Internet services. The Wi-Fi network fuses of 800 minutes. However, fierce competition in the voice
the cost efficiency of IP networks with the enormous size market has seen prices swiftly drop and voice traffic growth
of mobile networks while removing the access bandwidth slow down. Faced with this situation, operators can achieve
bottleneck of mobile networks, and greatly enhances user steady revenues only when the contribution of data services
experience. to the average ARPU grows at a rate higher than 1.5%.
By differentiating Wi-Fi subscribers through automatic As a leading U.S. integrated service operator and also
access authentication software, AT&T has grown the nation’s largest mobile operator, Verizon is actively
subscribers and improved their loyalty. High-speed seeking to create a balance between voice and data services
bandwidth service subscribers get free access to Wi-Fi for sustainable revenue growth.
hotspots across the U.S. Second-tier subscribers can enjoy Although most mobile operators hesitate to waive
the Wi-Fi access service for 1.99 USD each month while charges for long-distance calls and roaming services,
non-subscribers have to pay 7.99 USD per day for hotspot Verizon has looked to the future and partnered with
access. Skype. As voice services are giving way to data services,
AT&T has also greatly eased its network burden by the operator has begun to open its interfaces for
using Wi-Fi. Notably, mobile service revenue surged subscribers to use Skype applications on nine bundled
a substantial 10% in 2009 thanks to the increasing smartphones for mobile Internet communications at a
popularity of the iPhone. Though they account for only lower price. This marks the beginning of Verizon’s role
3% of AT&T’s subscriber base, iPhone users consume up shift from a traditional mobile operator to a provider of
to 40% of the company’s total bandwidth. Furthermore, communication terminal data service solutions.
the growing application data traffic has triggered network By partnering with Skype, Verizon has gained access to
congestion, blocking some subscribers from accessing the a vast base of global social networking customers, and has
operator’s network. swiftly entered the youth market and the enterprise market
Seamless switching between 3G and Wi-Fi networks dominated by BlackBerry terminals, building a solid
has come to the rescue, alleviating a lot of the blockages subscriber foundation for its future expansion into data
as iPhone users can automatically switch to the Wi-Fi services. Also, as a forerunner in the LTE market, Verizon
network when moving within the coverage range, with is dedicated to meeting the ever-increasing user demand
transmission speeds of up to 11Mbps. The Wi-Fi network for higher bandwidth and lower latency. Utilizing its
diverts and relieves 3G traffic loads, helping to improve extensive experience in mobile broadband deployment and
network quality and download capacity and sharpen solid expertise in LTE wireless broadband, the operator
service competitiveness. In February 2010, AT&T doubled also plans to move a wide array of applications from wired
the download cap from 10M to 20M. broadband networks to mobile networks.
Enterprise services contribute 40% of AT&T’s total By Wang Kening & Ling Yun
The LTE wireless WAN delivers wireless connectivity
Win-Win / AUG 2010
Leading incumbents have stepped up efforts to consolidate networking
resources and explore service growth models in addition to delivering
high-quality, high-speed and low-cost networking services.
to mobile phones and a broader range of consumer 4G capability with the existing EV-DO’s 3G capabililty. It
electronics and devices. This revolutionizes the revenue unveiled the industry’s first CDMA/WiMAX dual-mode
model where operators charge fees from subscribers only, service package to boost subscriber loyalty by delivering
and allows for increased profits from offering remote the highest mobile network speeds. With a 3G service
information-processing and M2M services to content and package priced on average at 59.99 USD, subscribers
application partners. can access unlimited 4G traffic in addition to 5GB of
Verizon focuses on three areas: consumer electronics 3G traffic over Verizon’s network, or 3G traffic of up to
products and applications; end-to-end information transfer 300MB over other networks.
between wireless devices like wireless medical care and Since Wi-Fi capability is built into increasingly more
security surveillance applications; and remote information consumer electronics, Sprint has launched its WiMAX
processing, such as UPS vehicle tracking. network-based 3G/4G wireless routers, which allow multiple
It is predicted that 70% of the services will be accessed Wi-Fi devices to concurrently access the wireless broadband
indoors, and that 20% of this indoor coverage will provide network. These routers enable subscribers to connect to a 4G
80% of the service revenue after the 3G network becomes mobile broadband network via a Wi-Fi-enabled device for
fully operational. Market research reveals that 85% of U.S. 10Mbps downloads. When the 4G network is disconnected,
home users potentially demand indoor coverage. As the the routers can automatically switch to the 3G EV-DO
operator that delivers the highest network quality in the network, which supports a peak download speed of 3.1Mbps.
U.S. with a continual focus on indoor coverage, Verizon Each subscriber is allowed to connect up to five Wi-Fi devices,
introduced a Femtocell enterprise service plan for 199.99 such as laptops, cameras and game consoles. Moreover,
USD in 2010. Femtocell technology has improved indoor multiple subscribers can access the Internet concurrently
coverage remarkably within an area of 5,000 square feet to watch videos, download music and play games while
(1524 sq. meters), giving subscribers access to faster indoor browsing the web.
mobile services via the traditional fixed broadband network.
Fixed operators look to home networking
Sprint Nextel harmonizes multi-technology Fixed network operators in the U.S. generally specialize
networks in regional operations. Quest and CenturyLink lead the
fixed network market, trailing behind the largest integrated
Among the U.S. mobile operators, Sprint Nextel service operators, AT&T and Verizon. Fixed network
supports the most network standards, such as its own operators generate an ARPU of around 31 USD, which is
brand iDEN and CDMA networks, and has invested in far below the level for mobile and integrated operators as
Clearwire’s WiMAX network. The iDEN network targets well as MSOs.
industry and prepaid subscribers, while the CDMA network To compete with mobile, VoIP and high-speed
serves high-end subscribers. WiMAX and CDMA networks broadband access services, legacy fixed network operators
combine to offer best-in-class high-speed data services. usually initiate mergers and acquisitions (M&As) to
As the virtual operator of Clearwire’s WiMAX network, achieve economies of scale and reduce costs through
Sprint became the first in the U.S. to deliver a faster synergy. Speeding up broadband service access and
wireless broadband network, as WiMAX had a two-year service bundling helps increase market share by attracting
head start over LTE. The operator integrated WiMAX’s subscribers. Entering the wireless market and launching
Win-Win / AUG 2010
While increasing the residential and business subscriber base in the
voice market, MSOs compete strongly with telecom operators. They are seeking to
upgrade their networks to DOCSIS 3.0 to deliver higher transfer speeds.
FMC to extend service range and build a cost-effective
network infrastructure to lease network resources will also
MSO reaches beyond cable to
boost competitiveness. multiple services
Value-added broadband services provide the engine for
revenue growth. These services include home networking Multiple system operators (MSOs) offer a wide variety
support, security services such as firewall and antivirus of services such as digital video, VoD, high-speed Internet,
protection, online games and entertainment for residential VoIP, and voice. They generate an ARPU of 40 USD, a
users, QoS-differentiated services oriented to enterprises figure far below the revenue level for wireless operators.
and high-end users, and remote file storage. While increasing the residential and business subscriber base
As home networking continues to grow in the U.S., in the voice market, MSOs compete strongly with telecom
integrated services that combine voice, Internet and TV operators by offering high-speed bandwidth based on robust
capabilities have increasingly led the trends. By 2011, the video and content production and transfer capabilities, as
percentage of U.S. voice subscribers that sign up broadband well as entertainment. They are seeking to upgrade their
service bundles is expected to climb to 82% from 40% in networks to DOCSIS 3.0 to deliver higher transfer speeds.
2007. Despite a lower yield than voice services, TV video MSOs are also making a foray into the wireless area
services generate a new revenue stream for fixed network through network construction or virtual operations as a
operators as the growth of voice revenue slows. way to offer Quad-play services that are more competitive.
Americans spend a daily average of 4.7 hours watching When Clearwire rolled out WiMAX services, for example,
TV and telecom operators are competing for markets Comcast, the MSO market leader and a mobile virtual
with cable TV companies by accelerating IPTV services. network operator (MVNO), launched WiMAX-based
Up to 9 million homes are expected to subscribe to IPTV unlimited wireless Internet access service alongside
services offered by telecom operators by 2011. By serving Internet telephony and cable TV services.
subscribers through broadband access and set-top boxes, Cox Communications, the No.3 U.S. cable TV
telecom operators outperform cable TV companies in terms operator, has extended its reach to the mobile area
of bandwidth, implement the same marketing strategy as by building a CDMA EV-DO network, providing
these companies, and offer lower-priced services. subscribers with one-stop services. While reducing the
By the end of 2010, over 60% of U.S. homes are total communication service charge for subscribers,
predicted to have HDTV. That translates into around 80 the combination of multiple services has considerably
million TV sets, plunging HDTV into a new battlefield bolstered loyalty. For each additional service bundle,
in the U.S. telecom market. HDTV generally requires the churn rate has dropped 20%. This has helped Cox
12MB network bandwidth for downloading, which is to differentiate itself from its rivals with a high-quality
still way above the current U.S. average home downlink network and superior subscriber-centric services.
bandwidth of 7.12MB. Backbone network traffic will soar
at an annual pace of between 50% and 80%, while access
network traffic will grow exponentially. Therefore, telecom Satellite service operators exploit
operators are investing aggressively in high-speed fiber
networks, hoping to expand the home network market
spectrum resources to provide a
based on a high-speed network operation platform. competitive pipeline
Win-Win / AUG 2010
Mobile satellite service operators enter the broadband market by partnering or
merging with emerging mobile satellite service providers, moving to tap the broadband
market by developing more powerful satellite capabilities and chipsets.
Mobile satellite service operators enter the broadband Google offers the world’s most popular search engine
market by partnering or merging with emerging mobile and a broad range of Internet services. This growing
satellite service providers. Mobile Satellite Ventures number of services includes email, file management,
(MSV) and TerreStar both announced plans for next- e-map, text processing, social networking, phone inquiries,
generation satellite services supporting voice and high- and video distribution. By marrying superior services with
speed data transfers. By the plan, they would begin to a free-of-charge model, Google has built a huge user base
deploy terrestrial networks after obtaining an ancillary on an increasing number of services, paving the way for
terrestrial component (ATC) license from the Federal the Internet giant to expand into network operations. In
Communications Commission (FCC), as part of their terms of mobile phone services, the terminal operating
move to tap the broadband market by developing more system, and network infrastructure construction, Google
powerful satellite capabilities and chipsets. has launched a series of initiatives to hone its competitive
A terrestrial network does not necessarily require edge in the application service market and direct users
nationwide coverage, and instead focuses on specific toward high-speed broadband services.
areas, such as university campuses, commercial centers,
and areas outside the coverage range of terrestrial mobile Expanding the mobile market with a service
cellular networks. The ability to switch between satellite combination
and terrestrial mobile cellular networks appeals strongly to
Despite fat profits from PC application services, Google
subscribers. Satellite-based mobile phones are already on
is expecting to profit more from target mobile subscribers.
the market. Inmarsat has unveiled the ISatPhone service
The company serves over 30 million mobile Internet users,
that provides satellite and GSM connections, positioning
which account for more than 60% of the total U.S. Internet
the operator as a pioneer in mobile satellite services.
user base. It has created a synergy between mobile searches
Although a number of leading tier-1 operators have
and other mobile applications such as location services
acquired spectrum frequencies that cover most of the U.S.
and voice inquiries. This has brought Google a long-term
over the last two years, a host of other operators are still in
revenue stream from applications similar to telecom services,
need of additional spectrum frequencies. This has created
while at the same time attracting more users.
a business opportunity for satellite service operators. As
Users can dial 1-800-GOOG-411 for Google’s voice
each MHz-POP spectrum costs only 0.17 USD, which is
inquiry service free of charge that gives callers a computer
about one-fifth of the price charged by other operators,
response from Google. They are then prompted for a
satellite operators are beginning to study the feasibility
reply to these requests such as “Please comment on our
of constructing a nationwide high-speed mobile network
service after hearing a tone” or “Please press a key to rate
at low cost. Their aim is to profit from wholesaling
the service”. Besides giving users easy and free inquiries,
bandwidth resources to other leading or regional operators
Google identifies user behavior and requirements and
at competitive prices.
has established a massive database of comments and
recommendations. The database enables Google to get
Google expands from Internet to a clear picture of regional information, accurately target
potential customers, and establish a focused marketing
telecom network access model in cooperation with ad agents.
Win-Win / AUG 2010
In terms of mobile phone services, the terminal operating system, and
network infrastructure construction, Google has launched a series of initiatives to
hone its competitive edge in the application service market.
Google has continuously invested in location services Map services. In the future, Android will add needed
that have become its most profitable mobile application, muscle to terminal devices such as laptops, netbooks,
accounting for 76% of its mobile service revenues. Based and e-readers beyond providing a built-in service port for
on its Google Earth platform and the Internet, Google mobile phones.
has crafted a systematic database of e-map coordinates.
As users increasingly use services like Google Wi-Fi, and Infrastructure construction promotes network
correct and refine map coordinates, Google can offer more openness
accurate map navigation and mobile location services.
During voice inquiries and location services, users In addition to competitive services, low cost and
inform Google of their locations as they connect to its high speeds are defining factors that shape the Internet
network. This allows Google to provide users with search landscape. In 2008, despite its leading position, Google
and advertising services by location, and search a huge failed to obtain spectrum in radio frequency bidding.
amount of geographical information for accurate location However, the company prompted the FCC to open
information. This in turn helps ad agents accurately target networks that operate within new spectrums, and then
ads to the audience likely to be most responsive. gained access to open wireless networks. Afterward,
Free operating system provides built-in service Google joined a number of telecom operators investing in
WiMAX, which has extended its competitive advantages
ports from the desktop search market to wireless.
Android provides a platform that keeps Google In 2010, Google announced a plan to deploy FTTH
competitive in both the mobile operating system (OS) access service in designated areas. Provided for up to
and mobile application areas. Android allows Google to 500,000 U.S. home users at a competitive price, the
extend its search services to the mobile world, consolidate service delivers Internet access with speeds of up to 1Gbps.
and expand its user base. The OS also enables Google Google also posted video clips on its YouTube website,
to accelerate expansion into the mobile application aiming to seek partnerships for network construction.
service market and is now the preferred platform for The aim of this move is to steer users toward high-speed
telecom operators. Google’s competitive edge has thus broadband services and drive operators to open their
been sharpened in terms of open software sources, third- network infrastructure.
party development, and industry chain alliances. All this The booming U.S. broadband market has created
helps Google build a mobile data application service opportunities and pressures that vary for different operators
platform and boost the development of mobile network and looks set to be reshaped. To stay on top of the rising
applications. broadband boom, the operators mentioned above have
In October 2008, Google unveiled the first Android differentiated their business models to align their resources
G1 mobile phone in the U.S. By early 2010, Android with strategic visions while creating a market ecosystem that
secured around 4% of the mobile OS market, putting it in combines innovation and cooperation. This provides a role
a better position to compete against Symbian, Windows model for other operators that would like to benefit from
Mobile, and iPhone OS. The Android platform has greatly the huge and highly competitive broadband market.
increased the use of Gmail, the mobile store, and Google Editor: Xue Hua firstname.lastname@example.org
Win-Win / AUG 2010